Federal Tax Reform: A Serious CTF Proposal

[msj]

Business income is taxed on profit yet personal income is taxed based upon revenue. This difference allows business and self-employed to shelter much of their income. IMV they should be taxed on revenue or that same consideration to deduct expenses should be given to indivduals.

1) Businesses get to deduct expenses because the only reason they incur those expenses is because they need to in order to make money.

You earning your employment wages and then turning around to buy a Wii or a washing machine is not the same thing as a business buying a computer to track inventory.

One is clearly personal and therefore not worthy of deduction while the other is clearly business related and worthy of deduction.

Of course, if the business thought it could make more money without buying the computer it would and, therefore, would have no deduction - yet have more money in the bank.

I don't know why this is so hard to understand - getting tax savings from a deduction still means that you are out of pocket the 60 or 70 cents for the $1 you spent to get the deduction.

Business people don't go looking to spend money for the sake of saving 30 or 40 cents.

At least smart business people don't waste their money like this.

2) Personal expenses are not allowable deductions under the Income Tax Act.

3) Individuals can deduct certain expenses if they incur them to earn employment income and the proper documentation is filled out correctly.

4) The CPC implemented a "Canada employment tax credit" as a means to mitigate this alleged "advantage."

The problem with this, however, is that the single/dual shareholder owned corporation not only gets to write off business expenses at the corporate level but the shareholders, as employees of the company, get the CETC on their personal tax returns.

In the end, the government would have been better off not having this tax credit and focusing more funds to allow the CRA to crack down on aggressive businesses to prevent and reduce businesses from deducting expenses that have personal elements to them.

[Renegade]

1) Businesses get to deduct expenses because the only reason they incur those expenses is because they need to in order to make money.

You earning your employment wages and then turning around to buy a Wii or a washing machine is not the same thing as a business buying a computer to track inventory.

There are a wide variety of expenses which are incurred to earn income some are deductable and some are not. Even some of which are deductable are limited.

For example:

1. If I need to pay for transportation in order to get to the workplace why are those costs not deductable because surely if I didn't incur those cost I couldn't earn the income.

2. Most workplaces have a dress code which I must adhere to. Should not my workplace clothing be deductable?

3. Are my food and shelter expenses not necessary to sustain myself in order to earn a living? If you don't think so, how is it that a business can claim those expenses as deductions when it sends an employee on a business trip.

4. Childcare expenses are limited. If I worked additional hours and thus needed additional childcare, why should those be limited?

I could go on, but you get the idea. There are huge tax advantages to being self-employed. Ask any accountant. When a business has an executive meeting at an exotic locale, they still write off those expenses even though the same business purpose could have been accomplished in a far more mundane and inexpensive locale. If you think that there are not signifcantly more opportunities to avail onself of tax deductions if you are a business or self-employed you are acting naive.

Every employee if given the opportunity would be self-employed because of the tax advantages, which is why the government sets rules on who can be considered self-employed.

[Pat Coghlan]

To be fair, some business people are aggressive and get away with including personal expenses into their businesses. But that is called tax evasion.

There is an accountant I used to exchange ideas with in one of the newsgroups. He stated that it was the norm for all of his self-employed clients to direct income to their spouse to achieve income splitting.

An old (old) girlfriend of mine's father had a denture clinic. Every time she bought items for school (calculators, supplies etc.) the mother - a salaried employee of the business, btw - collected the receipt to include with the other expenses that year. None of this "personal use only" crap. And that was only the stuff I knew about.

Let's face it, now that pensioners can split income, the only ones left are the families in which one spouse earns most or all of the income who is also an employee.

[Pliny]

Does inconsistency = fair?

Whether they want to be fair or unfair, they at least need to be consistent.

They are consistent. If they don't get you coming, they get you going - that's being consistent. Raise your head above ground and they deliver the one, two - and they are very consistent about it.

I know you aren't concerned about "fair" anymore. I think you have been convinced of that.

[msj]

There is an accountant I used to exchange ideas with in one of the newsgroups. He stated that it was the norm for all of his self-employed clients to direct income to their spouse to achieve income splitting.

All the more reason for the CRA to spend more time scrutinizing wages to family members.

Nevertheless, payment to one's spouse is not necessarily personal - if it is for work done then who are you to decide whether it is fair to pay $10/hour or $50?

An old (old) girlfriend of mine's father had a denture clinic. Every time she bought items for school (calculators, supplies etc.) the mother - a salaried employee of the business, btw - collected the receipt to include with the other expenses that year. None of this "personal use only" crap. And that was only the stuff I knew about.

Which is clearly tax evasion.

Not all businesses take part in that kind of thing.

[Hydraboss]

There is an accountant I used to exchange ideas with in one of the newsgroups. He stated that it was the norm for all of his self-employed clients to direct income to their spouse to achieve income splitting.

An old (old) girlfriend of mine's father had a denture clinic. Every time she bought items for school (calculators, supplies etc.) the mother - a salaried employee of the business, btw - collected the receipt to include with the other expenses that year. None of this "personal use only" crap. And that was only the stuff I knew about.

As was said earlier, that is tax evasion (or outright fraud). Making that argument is like saying that you don't have to pay your income tax at all. You don't, unless you get caught.

Let's face it, now that pensioners can split income, the only ones left are the families in which one spouse earns most or all of the income who is also an employee.

Please be more clear. Are you saying the working spouse is an employee (of a company) or the non-working spouse is an employee (of the working spouse). If it's the latter, me and the wife is a gonna have a talk. (I always thought she should work for me!)

We are not discussing how you can cheat and get away with it. We are discussing how things work if you do it legally.

[Hydraboss]

Well, given that one's tax rate is higher as one's income goes up then it only makes sense that the tax saving from the deduction would be greater.

You do realize that spending money in order to earn money still leads one to be out of pocket even after the tax savings?

Business owners are constantly audited for personal usage of their vehicles.

They, too, are not allowed to deduct the usage of their vehicle when they drive it from home to the office and back home again.

Other business uses - from the office to a client for example, are deductible and, of course, if a person is an employee then he/she should get his/her employer to fill out the proper form so that he/she can deduct allowable employment expenses (which includes allowable vehicle expenses).

Not a good example - the employer would only be allowed to deduct 50% of the meal and the meal has to be considered "reasonable" per section 67.

Not exactly a lucrative write off.

Of course, in the real world if any potential employee offered to take me out to lunch I probably would say no and quickly strike that person off my list of potential candidates. But then, I have never liked suck ups.

Of course, when the business sells the building then it has to pay tax on any capital gain and on any recapture (recapture occurs when the business depreciates the cost of the building and then sells the building for an amount that is more than the undepreciated balance - the difference is taxed as fully taxable income).

A person's principal residence? Tax free.

A person's second home that is rented out? Well, then the building can be depreciated and the loan interest deducted since the person has purchased the home to earn income. Recapture could occur just like to the business above.

Note that land is not depreciable and, therefore, is not written off.

Businesses write off expenses they incur in order to earn business income.

As a business person I can assure you that I would rather not have the deduction (while noting that good business people incur expenses in order to earn more income rather than incurring the expense for the sake of saving taxes).

If I can earn $100 with no write offs then I am certainly better off than if I have to spend $30 (on, say, employing someone) in order to earn that $100 in the first place.

Even with a tax rate of 40% I would be better off if I wasn't forced to incur the expense:

Earn $100 with no expenditure needed = $60 net in my pocket.

Earn $100 revenue less $30 cost = $70 net income before taxes. Afrer tax this is $42.00 into my pocket.

Gee, what a deal! How can I find a way to spend more of my revenue on deductible expenses! Look, I get to save taxes by doing this! [/sarcasm]

To be fair, some business people are aggressive and get away with including personal expenses into their businesses. But that is called tax evasion.

Generally, most businesses do account for personal use and/or get audited at some point and are hammered with non-deductible penalties and interest.

Wow, and to think I was just going to say, "Relax, Jer, I was just f**king with you."

Nicely answered msj.

[msj]

There are a wide variety of expenses which are incurred to earn income some are deductable and some are not. Even some of which are deductable are limited.

For example:

1. If I need to pay for transportation in order to get to the workplace why are those costs not deductable because surely if I didn't incur those cost I couldn't earn the income.

There not deductible for the same reason I don't get to deduct them for when I drive from home to the office despite having a professional corporation: because they are considered personal.

Yes, there are some interesting tax cases allowing some people to deduct such expenses against business or employment income - but those are under certain circumstances which are beyond the scope of this forum.

2. Most workplaces have a dress code which I must adhere to. Should not my workplace clothing be deductable?

They are considered a personal item. Yes, if the company pays for uniforms then the company will deduct that as an expense. Yes, if there is necessary clothing (safety gear for instance) then this is clearly an expense to the company.

I wear suits to work - I don't deduct them because while they are primarily for work I can, and do, where them to personal functions. It's called SOL.

With items like this and #1 and #3 it should be obvious to all that it is easier, practically speaking, to disallow the deduction of expenses which are mostly personal in nature so that neither employees or businesses get to deduct them unless they are, in fact, business related.

3. Are my food and shelter expenses not necessary to sustain myself in order to earn a living? If you don't think so, how is it that a business can claim those expenses as deductions when it sends an employee on a business trip.

A business trip is clearly for business purposes (and even then there are limitations). Once again, an employee is as out of luck as I am when it comes to writing off groceries for tax purposes.

BTW, travel and meals are often audited by the CRA and I have seen many tossed out for inadequate documentation.

4. Childcare expenses are limited. If I worked additional hours and thus needed additional childcare, why should those be limited?

This is a fair point. The limits only get changed whenever someone at the Finance Dept. seems to remember.

I don't have a problem with the limits in that I have never seen anyone actually come close to exceeding them but that will clearly change if those limits aren't increased.

And there's your answer - there are limits because not enough people are effected and/or care.

I could go on, but you get the idea. There are huge tax advantages to being self-employed. Ask any accountant. When a business has an executive meeting at an exotic locale, they still write off those expenses even though the same business purpose could have been accomplished in a far more mundane and inexpensive locale. If you think that there are not signifcantly more opportunities to avail onself of tax deductions if you are a business or self-employed you are acting naive.

Every employee if given the opportunity would be self-employed because of the tax advantages, which is why the government sets rules on who can be considered self-employed.

Fair enough. In my business we are planning our yearly meeting in the US and it is clearly allowed under the tax rules - we're tax accountants so we know all about the limitations in place on this type of thing.

And that is the point - there are limitations. I have clients who try to write off the trip to Italy. Some are convinced to write off a portion (10-15% as business) and don't get audited likely because this is a reasonable amount and their travel expense doesn't look too high when the government sees their tax return. Others aren't convinced and are surprised when I tell them to go elsewhere (in only extreme cases) or are told to save their tax savings if/when the audit comes.

Then when the audit did come they got to pay interest and penalties.

Sure it happens. It does not justify disallowing all expenses and taxing only on revenues - different businesses have different gross and net margins so this should obviously be a bad idea.

As for employee vs. self-employed - you are only looking at self-employment through rose-coloured glasses.

You have no idea how difficult it is to maintain cash flow during start up (in my case when I paid hundreds of thousands for a partnership interest). How difficult it is to maintain staffing levels, to maintain records (thankfully I can do that myself - it I had to hire an accountant and lawyer I'd be out another $2,000+ per year - but, hey, it's a deduction, so I would be benefiting from spending that money so maybe I should spend it anyway [/sarcasm]).

Oh yeah, and then there is that other "benefit" of being self-employed: keeping records to defend against a GST and/or income tax audit.

Sure was easy when I was an employee - kept my T4, RRSP slips and other slips attached to my income tax return. Storage fees? No, didn't have to pay any storage fees in order to keep 6 years worth of records (including clients) just in case. But, hey, storage fees are a deductible expense so I must be benefiting and screwing over everyone else by expensing it.

I have seen many people try self-employment and fail.

The reason those of us who are self-employed for a long period of time are successful is because we would be successful employees if we went that route and found it as rewarding. Those people are the CEO's, CFO's and other high mucky muck employees.

But people like you probably think those people are just lucky while people like me are screwing the system while the mediocre employee gets the shaft.

[Jerry J. Fortin]

I have never before read so much utter drivel. Not all business is small business is it? Not all small business is sole proprietorship is it? There are huge tax savings for BUSINESS, whether it is small a small business for someone to work out of their home, or a large business on the scale of a multi-national corporation.

Lets talk about how these things can be equated with personal income tax. They can't be, end of conversation. Now lets discuss how different these two different things really are. Expenses of employment are not generally deductible, expenses of business generally are. Based on that basic concept alone, the employee faces a disadvantage when calculating taxes. From that point forward in calculations the situation degrades for individuals. It is designed to be that way.

A person can become a small business owner for relatively few dollars. Once there all sorts of nice things can happen to them. Lets say the business was that of a travel agent. First you will need an office, so lets develop the basement of the house and use it as an office. Suddenly you get to write off the amount of square footage for the office as a business expense. So the development cost is 100% deductible. Now you have a place to work in that instantly keep the cost of the development free from taxation. The next step is to buy some phone equipment and a computer, 100% deductible. Now you have a place to work and the tools you need to get the job done. You will need a vehicle to go buy supplies and meet customers, so you go and lease a car, 100% deductible. Car insurance 100% deductible, gas 100% deductible, parking 100% deductible, maintenance 100% deductible. You use your deductible phone to setup an appointment with a potential client. You arrange a meeting at a local cafe. but the lunch is only 50% deductible! Thats okay because you ate steak for free and the client was charged for the service of buying the lunch as part of the contract price. You sell a dream vacation to the client, provided that you can prove that the hotel is great, the food is to die for and the service was good. So you drive home in your deductible car, go downstairs in your deductible office and break out your deductible computer. You quickly go onto the internet and find what you are looking for, so you take out your company credit card with its tax deductible high interest rates and book a quick tax deductible flight to Costa Rica. You call the limo company and get a tax deductible ride to the airport. You hop on the plane and fly south. Once there you call a tax deductible cab to get to your hotel package. You check into the all inclusive place and pay up front with your deductible credit card. First step is to get to your room and call the front desk, and see if there is a shop on site to pick up a few needed items. Of course there is! So down you go to the shop and buy a new swimsuit, a fresh suit, a nifty new digital camcorder and a laptop, thank god they are all tax deductible. You quickly race to your room and change, its lunch time. You need to get to the food place and checkout the available options, and of course film it for your potential customer. After lunch you return to your room and transfer the recording to your laptop. You then plug into the internet and email that pesky client.

As it turns out, the client got a better deal on E-Bay, so you lose the deal and are out of pocket for those expenses. You call your accountant when you get home and he tells you not to worry, we can show it as a loss and get a tax credit for it.

Meanwhile you finished the basement, scored a bunch of neat furniture, and bought a car. You had a vacation, ate like a king and had a great time. All legally tax deductible.

Now why is it that this kind of thing can happen?

As the business get bigger and better the perks and opportunities increase. Tell me I am wrong about this, then you can tell me what legitimate expenses are. The citizen gets screwed so the business can make money, and some say that the system isn't fair. Go figure.

[Pliny]

Not a good example - the employer would only be allowed to deduct 50% of the meal and the meal has to be considered "reasonable" per section 67.

A little unfair when compared to Government employees who can claim $35/day for meals without receipts when traveling. Just one of those perks voted for by an informed populace.

Hey, Jerry - How does the citizen get screwed so business can make money? Shouldn't it just be the citizen gets screwed?

Edited February 13, 2008 by Pliny

[msj]

I have never before read so much utter drivel. Not all business is small business is it? Not all small business is sole proprietorship is it? There are huge tax savings for BUSINESS, whether it is small a small business for someone to work out of their home, or a large business on the scale of a multi-national corporation.

The principles are generally the same.

The major difference between a small business and a large one (besides the small business being eligible for the small business tax rate) is that large ones are less likely to have personal expenses go through since they have internal controls to reduce the amount of tax evasion (although there are some good papers on public companies paying more income tax in order for the CEO's to maximize their bonuses but that is beyond the scope of this thread).

Lets talk about how these things can be equated with personal income tax. They can't be, end of conversation. Now lets discuss how different these two different things really are. Expenses of employment are not generally deductible, expenses of business generally are. Based on that basic concept alone, the employee faces a disadvantage when calculating taxes. From that point forward in calculations the situation degrades for individuals. It is designed to be that way.

Employees can deduct some expenses (they do have more limitations than a business) if they incur expenses to earn employment income.

Just like a business, personal expenses should not be deducted (which would be tax evasion or tax fraud as already mentioned).

Given that an employee does not face the prospect of business bankruptcy, business losses, or business risk or cash flow problems I really don't have much sympathy.

A person can become a small business owner for relatively few dollars. Once there all sorts of nice things can happen to them. Lets say the business was that of a travel agent. First you will need an office, so lets develop the basement of the house and use it as an office. Suddenly you get to write off the amount of square footage for the office as a business expense. So the development cost is 100% deductible. Now you have a place to work in that instantly keep the cost of the development free from taxation. The next step is to buy some phone equipment and a computer, 100% deductible. Now you have a place to work and the tools you need to get the job done. You will need a vehicle to go buy supplies and meet customers, so you go and lease a car, 100% deductible. Car insurance 100% deductible, gas 100% deductible, parking 100% deductible, maintenance 100% deductible. You use your deductible phone to setup an appointment with a potential client. You arrange a meeting at a local cafe. but the lunch is only 50% deductible! Thats okay because you ate steak for free and the client was charged for the service of buying the lunch as part of the contract price. You sell a dream vacation to the client, provided that you can prove that the hotel is great, the food is to die for and the service was good. So you drive home in your deductible car, go downstairs in your deductible office and break out your deductible computer. You quickly go onto the internet and find what you are looking for, so you take out your company credit card with its tax deductible high interest rates and book a quick tax deductible flight to Costa Rica. You call the limo company and get a tax deductible ride to the airport. You hop on the plane and fly south. Once there you call a tax deductible cab to get to your hotel package. You check into the all inclusive place and pay up front with your deductible credit card. First step is to get to your room and call the front desk, and see if there is a shop on site to pick up a few needed items. Of course there is! So down you go to the shop and buy a new swimsuit, a fresh suit, a nifty new digital camcorder and a laptop, thank god they are all tax deductible. You quickly race to your room and change, its lunch time. You need to get to the food place and checkout the available options, and of course film it for your potential customer. After lunch you return to your room and transfer the recording to your laptop. You then plug into the internet and email that pesky client.

Sure, or you can be an employee and not incur any of these expenses. Nor do you have to deal with the hassle of a trust account (which travel agents have) nor have to pay fees to the relevant licensing agents in order to have your trust account audited on a periodic basis.

Nor would you have to bother with maintaining records, taking the time or spending the money to do this (and since time is money if you do it yourself then it is the same thing - your working for free).

Of course, vehicle expenses are rarely deducted at 100%. I am dealing with an audit right now where a guy claimed 100% vehicle usage on his personal tax return and this was likely the reason he got flagged for an audit.

And leases? Well they have limitations on their deductibility too.

Jerry, let's face facts - you don't know anything about tax - whether it's theory or the practice. So stop making up stories.

The "development" of the basement would not be a 100% write off since most of the development would likely be capital in nature. This means that if the business person wants to deduct this as an expense or as capital cost allowance (tax jargon for tax deductible depreciation) then he can kiss his principal residence exemption good bye. This means when he sells his house to move to the old folks home that he has to pay tax (and possibly recapture) on the sale.

You also aren't too financially adept when it comes to finances - it makes no sense to rack up debt on a credit card. Even if it is used for business purposes so that the interest is tax deductible the business owner is always better off to pay the lowest interest rate possible because the business owner is still out of pocket on the expense (the tax savings are still less than the amount of the expenditure).

As it turns out, the client got a better deal on E-Bay, so you lose the deal and are out of pocket for those expenses. You call your accountant when you get home and he tells you not to worry, we can show it as a loss and get a tax credit for it.

You don't even know the difference between a tax deduction and a tax credit.

And isn't that just wonderful? The business person is so much better off for not making a sale but, hey, he still gets the tax savings from all those deductions (note the sarcasm here - it is always better to earn as much money as possible with as few expenses as possible).

Sure, businesses have sales go bad or inventory that goes obsolete and those are deductions. Those are also missed opportunities since those expenses are a dead weight since they did not generate any revenue.

It's no different when I pay an employee who spends too much time working on a tax return. I bill $200 but the employee got stuck and I paid him $250 in wages.

Who's getting the better deal there? It's not me - it's clearly the employee and possibly the client. Oh, but I get the tax savings from writing off the employee's wages --- oooooh. I'm still losing money while the employee pockets his pay cheque.

Meanwhile you finished the basement, scored a bunch of neat furniture, and bought a car. You had a vacation, ate like a king and had a great time. All legally tax deductible.

Now why is it that this kind of thing can happen?

As the business get bigger and better the perks and opportunities increase. Tell me I am wrong about this, then you can tell me what legitimate expenses are. The citizen gets screwed so the business can make money, and some say that the system isn't fair. Go figure.

If a person converts a portion of his house to business usage and meets clients there then why shouldn't this business portion be deductible?

If he wasn't trying to earn income from the use of the office then he would not have incurred the expenses to convert it to an office in the first place.

You also do realize the one cannot claim business use of home (BUOH) unless one has a profit? So if this guy generates losses (which in your strange world would be proof that he is screwing the little guy) he has to carry forward any BUOH to a future year when he does have net income.

Why shouldn't a business person get to deduct the business use (not the personal use) of his vehicle? If he wasn't trying to earn income from the use of the vehicle then he would not have incurred the expense in the first place.

Why shouldn't a business person get to deduct the business use of furniture? If he wasn't trying to earn income from the use of the furniture then he would not have incurred the expense in the first place.

Sure, tax fraud/evasion happens.

It happens when waiters don't declare all their tips or when a person works as a casual labourer and "forgets" to declare it.

[Jerry J. Fortin]

More drivel.

The entire point was the difference in how natural citizens are treated compared to legal citizens in terms of tax fairness. The reality is such that business pays a lower marginal rate to begin with. They have more deductions available to them and in fact pay less in tax as a percentage of their income. That is the long and the short of it. Take an equal amount of income for an employee and a small business now who would pay more in tax?

That is the point. Don't dance around the reality, just stick to the facts.

I made up a little story to illustrate the point, and was there any errors in the little story, I don't think so. So lets talk about tax fairness.

You obviously have a business, good for you. You also obviously deduct many little interesting expenses, some of which you damned well know are not available to individuals but are available to you because you have a business. You are a person as I am and the government treats us two people in a different manner over the same thing, that is unfair. That is the point.

Of course it gets worse. As individuals, the higher income earners have access to more deductions than lower ones. That is not exactly fair either. The point is the entire system is designed to extract a revenue stream from citizens. It does not cater to the group that does not lobby for changes, in fact it caters to the group that does. The tax code was at one time far less complex and far more fair. As it currently stands it has been monkeyed with for the last 8 or 9 decades to reduce the tax load on individuals and groups that could afford to spend the time and effort to engage in an interaction with government for specific benefit. They have realized that benefit at the expense of the citizens.

Now remember that I am no lover of income tax. That is probably because I believe the government treats me like pond scum compared to the lot of business. Tax is supposed to be a burden society undertakes to provide programs and services for its citizens. It is not supposed to be a means of extracting a citizens hard earned money. My hangup with the system starts there. Individuals deal with witholding taxes, but business does not, is that fair? We pay tax payday by payday and then have to try and reclaim it at the end of the year. Business deduct their expenses all year long and then pay a much smaller percentage of their total income at the end of the year. This provides a far greater degree of freedom and access to earned or realized capital than a citizen that is employed can ever hope for.

I guess my biggest hangup with the tax system is that the entire concept of small business is a farce. They are receiving tax benefits

not available to individual citizens. The basic flaw of the system is how employees are treated. As a small business owner you are no doubt aware of the very real differences here. I can't hire my son to cut the grass and deduct this expense. If I ran a business out of my house I could. Would I have to pay tax on the sale of my home then, sure I would, but not until I sell it and make a profit from that sale. Even then the tax is deferred to a later date of my choice. Meanwhile the business run out of my home is bringing in money that has a reduced amount of taxation applied to it. That is not fair.

The most entertaining thing about taxes is how those small business operators look down at the folks doing the real work in this nation and tell us that we don't understand the system or how it works. We know how it works, we get screwed and you folks don't. We don't like it. The situation is rapidly degrading to the point that citizens are beginning to contemplate the concept of tax revolt. The current system is serving the purpose of creating a class based society, and that little fact is slowly becoming realized by the majority of the public. All because of taxes and greed. Its not envy on the part of the workers that is fueling this discontent, just the desire to be treated equally because we are not.

[Pliny]

I don't know why you are so down on business, Jerry. The individual who gets paid gets his T4 at the end of the year and takes it to H & R Block to calculate his overpayment and get his refund.

The Business person, has to all year long while not being paid calculate everyone's taxes and remit the payroll taxes, pay bookeepers and accountants and you think that because he can deduct some expenses he is better off?

I agree with you that income should not be taxed. I agree that the current system is unfair. Arguing that business gets a better break than the individual is rather moot in light of the fact that income should not be taxed in the first place.

[Renegade]

There not deductible ... because they are considered personal.

...

They are considered a personal item.

.

... It's called SOL.

With items like this and #1 and #3 it should be obvious to all that it is easier, practically speaking, to disallow the deduction of expenses which are mostly personal in nature so that neither employees or businesses get to deduct them unless they are, in fact, business related.

A business trip is clearly for business purposes (and even then there are limitations). Once again, an employee is as out of luck as I am when it comes to writing off groceries for tax purposes.

Your own response illustrates the inequity. You yourself have referred to the principle that expenses incurred to generate income should be deductible. In the case of indiviuals, many of those expenses are deemed "personal" and disallowed even when they have at least a partial valid business purpose in generating income. With businesses many of those deductions are allowed (yes, I understand subject to limitations and interpretation), but that is a far cry from not being allowed at all.

To sum it up, with individuals the expenses are presumed personal and disallowed, with self-employed and businesses the expenses are presumed to generate income and allowed (subject to audit and interpretation). Of course it is far "easier, practically speaking, to disallow the deduction", but is that the criteria you think the government should use in determining whether deductions are allowed to one group but not another.

I suggest the reason these deductions are not allowed is not related at all to tax "fairness" but because substantial revenue is at stake which the governmet cannot afford to lose, so it lets the inequity perpetuate.

And there's your answer - there are limits because not enough people are effected and/or care.

That's exactly the point. Not enough people are aware of the detail of the tax code to know how it impacts them. That individuals are getting screwed and don't know it, doesn't mean the screwing isn't happening.

Fair enough. In my business we are planning our yearly meeting in the US and it is clearly allowed under the tax rules - we're tax accountants so we know all about the limitations in place on this type of thing.

Again you illustrate the point. Business generally have the scale to employ expertise to be knowledgable on how far the tax rules can be stretched. The complexity of the law means that it is not cost effective for individuals to employ the same expertse. Because there are so many deductions available to business which are not availble to individuals the tax laws which can be "stretched" are far greater.

And that is the point - there are limitations. I have clients who try to write off the trip to Italy. Some are convinced to write off a portion (10-15% as business) and don't get audited likely because this is a reasonable amount and their travel expense doesn't look too high when the government sees their tax return. Others aren't convinced and are surprised when I tell them to go elsewhere (in only extreme cases) or are told to save their tax savings if/when the audit comes.

Since such a trip is clearly mixed business/pleasure, how is it that an employee who takes a trip to Italy and looks for potential employment cannot deduct part of the cost of his trip?

Sure it happens. It does not justify disallowing all expenses and taxing only on revenues - different businesses have different gross and net margins so this should obviously be a bad idea.

Personally I don't care if you tax on revenue or you tax on profit, I'm just saying it should be uniform for both business and individuals.

The fact that businesses have different gross and net margins is irrelevant. If they can't afford t pass on the cost they go out of business. Simple.

As for employee vs. self-employed - you are only looking at self-employment through rose-coloured glasses.

Not really. I have personal experience having been both self-employed and an employee. There are clear tax benefits to being self-employeed.

Let me ask you as a tax-accountant, if someone came to you and they were in a position where they could choose whether they would be self-employed or an employee, all oher things being equal, from a TAX-PERSPECTIVE only, which would you advise?

You have no idea how difficult it is to maintain cash flow during start up (in my case when I paid hundreds of thousands for a partnership interest). How difficult it is to maintain staffing levels, to maintain records (thankfully I can do that myself - it I had to hire an accountant and lawyer I'd be out another $2,000+ per year - but, hey, it's a deduction, so I would be benefiting from spending that money so maybe I should spend it anyway [/sarcasm]).

Oh yeah, and then there is that other "benefit" of being self-employed: keeping records to defend against a GST and/or income tax audit.

Sure was easy when I was an employee - kept my T4, RRSP slips and other slips attached to my income tax return. Storage fees? No, didn't have to pay any storage fees in order to keep 6 years worth of records (including clients) just in case. But, hey, storage fees are a deductible expense so I must be benefiting and screwing over everyone else by expensing it.

All true but irrelevant. We are not disputing the overhead and the real PIA it can be to be self-employed or a business, we are discussing the advantage in the tax system given to business and self-employed.

Are you somehow suggesting that the tax advantage is in compensation for it being a PIA to be a business?

I have seen many people try self-employment and fail.

So have I. But so what? I have also seen many people who have tried to be employees and fail.

But people like you probably think those people are just lucky while people like me are screwing the system while the mediocre employee gets the shaft.

CEOs. CFOs and other executives who are employees suffer the same restrictions as other employees. Generally they have enough clout to negotiate compensation in other tax-advantaged ways (such as stock options and benefits).

I don't think you are personally screwing the system because the system is geared to favour you and other self-employed. It is the system that is screwing employees.

[Jerry J. Fortin]

I am not down on business at all! Power to those folks who have a business, they have worked hard to make it work and deserve all the credit for making themselves independent of employers. Small business employs a large part of our workforce and for that they are to be commended.

My problem is with the system, not business. All I want is to be treated equally, meanwhile I get nothing but dingbats declaring their arrogant attitudes toward the working folks of this nation. It is despicable in fact that those citizens and those that came before them and will doubtless come after them have the audacity to seek beneficial treatment from the government.

I am against any kind of lobby efforts. This kind of nonsense has lead us to where we now find ourselves. Governments have been corrupted by this kind of thing. It is not as if this is news, but what is amazing is that we the citizens continue to allow the elected representatives the opportunity to fall into the trap of lobbyists.

In the case of income taxes I firmly believe that we should change to a consumption tax. No deductions , no income tax returns, no need for the bureaucracy of revenue Canada. Simply farm out the collection of taxes to vendors of products and services and have them remit those funds to the LOCAL governments. From there funding should be provided for communities, the defined balances forwarded to provincial governments. They should then deduct their defined benefits and remit the remaining portion to the federal government. The entire concept of transfer payments and equalization is a joke and wholly unfair to the tax payer.

As long as the legal citizens of this country are treated in the manner that they are, the natural citizens are doomed to be leveraged into a second class category. It is well past the time when citizens should have a say in how our nations are government. We have fought wars and suffered economic upheavals just to preserve our freedom and rights only to have governments take advantage of our good and peaceful nature. The citizens will soon be heard from and they will be saying that it is time to consider a direct democracy to provide them the opportunity to interface with the government in the political decision making process.

This is supposed to be a democracy, and in a democracy citizens should have a say. We are neither obeyed or listened to by our own government. We are allowed only a say in who we elect, not in what policy or agendas that those elected representatives undertake in our name and that is just plain wrong. Taxation is but the tip of the iceberg, but if people don't understand how they are being abused then we have a far larger problem than many think.

Income taxes are unfair and repressive. They interfere with the ability to support individuals, families and business efforts. The government does not earn the funds they extract from citizens, they merely levy a fee which some are able to afford but others are not.

A tax revolt is coming, trust me. The days of living in a classless society are coming to an end due to the greed of the individual and the collective stupidity of governments. It does not take a rocket scientist to figure this out. We don't need governments to hold our hands with cradle to grave benefits. We don't need the government to feed us and cloth us and put a roof over our heads. We need the government to protect and promote our right to take care of ourselves. We need to be able to earn our own keep, and take care of ourselves, that is what makes us free and allows us the liberty to choose our own destiny. To have government do these things for us detracts from that freedom and eliminates our liberty. With the governments making these decisions for us we lose our rights. Look around and tell me this isn't already happening.

Taxes are merely a symptom of the democratic disease of apathetic politics. That is the real enemy we face, and we can see that enemy every morning when we look at the mirror. We have nobody to blame but ourselves for the lack of courage to stand up and speak out about this system of abuse that we call government in this nation.

All citizens should be outraged at the efforts of politicians and media to twist the reality of our plight, the simple fact is we have been long deceived by those we place in political power and trust. Our society has reached a peak in its development from which we will never be able to move forward because of partisan and ideological division amongst citizens. The time will soon be upon us when a leader with sufficient vision and discernment will turn this nation upside down in an effort to create, promote and defend true equality. There will be absolute carnage if we allow this to continue much longer.

[Pliny]

Your own response illustrates the inequity. You yourself have referred to the principle that expenses incurred to generate income should be deductible. In the case of indiviuals, many of those expenses are deemed "personal" and disallowed even when they have at least a partial valid business purpose in generating income. With businesses many of those deductions are allowed (yes, I understand subject to limitations and interpretation), but that is a far cry from not being allowed at all.

To sum it up, with individuals the expenses are presumed personal and disallowed, with self-employed and businesses the expenses are presumed to generate income and allowed (subject to audit and interpretation). Of course it is far "easier, practically speaking, to disallow the deduction", but is that the criteria you think the government should use in determining whether deductions are allowed to one group but not another.

I suggest the reason these deductions are not allowed is not related at all to tax "fairness" but because substantial revenue is at stake which the governmet cannot afford to lose, so it lets the inequity perpetuate.

I enjoyed your reading your rebuttal to msj. However, I believe that because tax laws arenot applied equally government has no concept of "fairness", and I agree they allow inequities to perpetuate to their advantage. Fairness never being a consideration. As an example, a tax upon a tax is unjust but it perpetuates in our taxes upon gasoline. They have no interest in being fair, equal, just or honest. How did they lose this moral compass?

Primarily by instituting laws favoring one group over another - Families over singles. Businesses over individuals. Rich over poor. And in different respects vice versa. They do take advantage of the least knowledgeable as well. Those without the resources to complain or are too ignorant to even know they should complain.

The complication of the tax code leaves too much open to interpretation by government and leaves the individual vulnerable, not what you would expect from those delegated to protect the citizen.

I am interested in reading more from on this thread from all the contributors.

[Jerry J. Fortin]

That is the reason I prefer a consumption tax. It is blind to the individual or business. It is applied equally. It reduces bureaucracy and reduces the expense of government which in turn reduces the burden on the tax payer.

[Pat Coghlan]

To sum it up, with individuals the expenses are presumed personal and disallowed, with self-employed and businesses the expenses are presumed to generate income and allowed (subject to audit and interpretation). Of course it is far "easier, practically speaking, to disallow the deduction", but is that the criteria you think the government should use in determining whether deductions are allowed to one group but not another.

Employees can't deduct most work-related expenses such as clothing, meals, transportation etc. Reason: people are going to work regardless of whether these things are deductible.

One execption: daycare expenses. Fully deductible. Even *nanny* expenses are fully deductible. We're talking $10,000-$20,000 or more in deductions.

Isn't it great how a power couple with two six-figure incomes don't have a cent of this deduction clawed back, but an engineer with a wife and two kids at home can have all his child tax benefit clawed back because his (less than six-figure) income is too high?

I'd love to hear an explanation of why two married doctors with a $250,000 family income need to have 50% of their nanny's salary paid for by other taxpayers, while the majority of tax-delivered benefits are all subject to clawback.

[Renegade]

I enjoyed your reading your rebuttal to msj.

Thanks! Hopefully my points made sense to msj.

However, I believe that because tax laws arenot applied equally government has no concept of "fairness", and I agree they allow inequities to perpetuate to their advantage. Fairness never being a consideration. As an example, a tax upon a tax is unjust but it perpetuates in our taxes upon gasoline. They have no interest in being fair, equal, just or honest. How did they lose this moral compass?

Primarily by instituting laws favoring one group over another - Families over singles. Businesses over individuals. Rich over poor. And in different respects vice versa.

I believe "fairness" is used as a politically-correct justification for all kinds of tax-related initiatives, however the real motivitaion is far different than "fairness". Generally taxes are implementd because they are easily collectable using the existing collection infrastructure, will minimially affect the economy don't erode much poltical support. For the government the less visible the tax is the better. That is why the GST, a highly-visible tax, while conceptually a sound tax, was a political failure and led to the eroding Mulroney's political base. For some of the same reasons, the Conservatives introduce tax incentives which are primarily politically motivated. "Fairness" has very little to do with it, and while many governents use the word, few will provide the specifics on defining the term.

They do take advantage of the least knowledgeable as well. Those without the resources to complain or are too ignorant to even know they should complain.

The complication of the tax code leaves too much open to interpretation by government and leaves the individual vulnerable, not what you would expect from those delegated to protect the citizen.

This is perhaps the most distressing part. People who are being disadvantaged by the tax system, are in general unaware of it. Very few do tax planning and most don't even do their taxes themselves. Many take a simplistic view that what they owe once their tax return is done is their tax bill, without considering the much more deducted at source. At source deductions mask the amount of tax being paid by grabbing it before an employee even sees it. I suspect that if at source deductions were not in place and people had to cough-up directly once or more times a year, they would realize the extent of their tax bill and agitate for change.

[Renegade]

Employees can't deduct most work-related expenses such as clothing, meals, transportation etc. Reason: people are going to work regardless of whether these things are deductible.

Certainly people who earn sufficient over and above those expenses will continue to work regardless, mostly because they have no choice. In other situations where work-related expenses consume too much of income and are not tax-deductbale, the potential employee will simply (and logically) choose to collect social benefits where those are available.

None of this speaks favourably for the equity of deductions between businesses and individuals.

One execption: daycare expenses. Fully deductible. Even *nanny* expenses are fully deductible. We're talking $10,000-$20,000 or more in deductions.

Isn't it great how a power couple with two six-figure incomes don't have a cent of this deduction clawed back, but an engineer with a wife and two kids at home can have all his child tax benefit clawed back because his (less than six-figure) income is too high?

I'd love to hear an explanation of why two married doctors with a $250,000 family income need to have 50% of their nanny's salary paid for by other taxpayers, while the majority of tax-delivered benefits are all subject to clawback.

Pat, daycare expenses are one of the few deductions offered to individuals which bear some similarity to the many offered businesses. The govenment makes "interpretive" decisions on what are allowed deductions. If a nanny looks after a child but also cooks and cleans, then at least part of her role is personal and part used to generate income.

If you accept the logic that deductions used to generate income should be tax-deductable, then it is irrelevant if it the family with the $250,000 income which is using the deduction or it is a family with $60,000. The simple test is whether the expense is a necessary expense in order to generate income. In the case of a 2 income family, it is deemed necessary. In the case of a single income family, it is not because the other spouse is available to provide childcare. The size of the income is not relevant.

[msj]

Your own response illustrates the inequity. You yourself have referred to the principle that expenses incurred to generate income should be deductible. In the case of indiviuals, many of those expenses are deemed "personal" and disallowed even when they have at least a partial valid business purpose in generating income. With businesses many of those deductions are allowed (yes, I understand subject to limitations and interpretation), but that is a far cry from not being allowed at all.

No, expenses that are directly related to earning income should, generally, be deductible.

It makes more sense to disallow all people from deducting vehicle expenses for driving from home to work and back, for personal meals/groceries, and for personal clothing, and any other items where the personal element would be high.

Given that this thread started out with simplicity being one goal for changes I do not think allowing all people to deduct expenses that are only partially related earning income makes practical sense.

It sure would be good for accountants and would also require a tripling of the CRA audit budget though.

I also disagree with your notion of inequality. The business owner is deducting expenses that he/she incurs in order to earn income. If the business owner was an employee then he/she would not be incurring these expenses in the first place.

Why you and Jerry continue to overlook this fact is beyond me.

To sum it up, with individuals the expenses are presumed personal and disallowed, with self-employed and businesses the expenses are presumed to generate income and allowed (subject to audit and interpretation). Of course it is far "easier, practically speaking, to disallow the deduction", but is that the criteria you think the government should use in determining whether deductions are allowed to one group but not another.

No. Businesses are assumed to incur the expense for business purposes. If an employee is incurring an expense for the business he works for then he should ask to reimbursed for that expense and the business will deduct it.

If there is a personal element then the business is not supposed to deduct the expense or should prorate it appropriately and reasonably to extract the personal element.

I suggest the reason these deductions are not allowed is not related at all to tax "fairness" but because substantial revenue is at stake which the governmet cannot afford to lose, so it lets the inequity perpetuate.

My apologies but that is simply just ridiculous.

If the government were to take your complex plan and implement it then they would simply raise tax rates to protect their revenue base.

Employees would deduct all of their expenses, businesses would continue to deduct all of their business expenses and business people would deduct expenses just like the employees do (since you want to make vehicle between home and work deductible).

IOW, nothing word change - businesses would still, according to your logic, be getting a "benefit."

That's exactly the point. Not enough people are aware of the detail of the tax code to know how it impacts them. That individuals are getting screwed and don't know it, doesn't mean the screwing isn't happening.

No the point is that only a small percent of the population is not realizing a full deduction for day care expenses.

A very small minority of rich people are the ones who spend more than the limits and there is no political appetite to give them full deductions.

Can't say I really care one way or the other.

Again you illustrate the point. Business generally have the scale to employ expertise to be knowledgable on how far the tax rules can be stretched.

This quote in context of my planned business trip is completely wrong. We are not stretching any rules - we are planning the trip well within the bounds of the rules since the trip is a bona fide business trip.

The complexity of the law means that it is not cost effective for individuals to employ the same expertse. Because there are so many deductions available to business which are not availble to individuals the tax laws which can be "stretched" are far greater.

Your solution of extending deductions to individuals will not solve the complexity issue.

The reason the rules do get complex is because the government is trying to ensure that only business expenses and no personal elements are being deducted.

That is reality and last time I checked reality isn't going to change.

Since such a trip is clearly mixed business/pleasure, how is it that an employee who takes a trip to Italy and looks for potential employment cannot deduct part of the cost of his trip?

The answer here should be obvious - if an employee gets a job in Italy the employee would be well advised to sever his ties from Canada so as to not be taxable in Canada. In Italy that employee likely would be able to deduct the cost as a moving expense (I don't know since I don't know Italy's tax code).

Alternatively, if the employee qualifies for the overseas employment tax credit then he would want to maintain his Cdn residency in order to keep this credit which is very lucrative and would more than make up for this outrage of paying for his flight to Italy.

In either case, the employee should be getting the potential employer to pay for the trip so the hypothetical is ridiculous from the outset but I will continue to humor you.

A business person who travels to Italy for bona fide business reasons is doing so to generate more revenue (if he is looking for more customers) and/or decrease costs or improve productivity. In both cases this hits the bottom line of his business which continues to be a Cdn resident and continues to pay Cdn taxes.

Personally I don't care if you tax on revenue or you tax on profit, I'm just saying it should be uniform for both business and individuals.

Which demonstrates that you don't know much about business.

Look at the income statements and balance sheets for, say, Royal Bank, Bombardier, Suncor, SNC Lavallin, and Danier Leather.

It should be obvious that each industry has different inputs for them to earn their income. To simply apply a revenue tax would mean that the government would have to apply a different tax rate for each different industry.

As for it being uniform for business and individuals: once again, what do you not understand about businesses incurring expenses for business purposes?

If they were not in business then they would not incur the expense.

If you allowed individuals to deduct what are considered personal expenses (like clothing) then you would still have the business person deducting business expenses AND he would deduct clothing just like an individual.

Nothing would change (except for higher tax rates, more people having to file more complicated tax returns, and more funding for CRA audits) and you and Jerry would still be complaining about business people still deducting business expenses.

The fact that businesses have different gross and net margins is irrelevant. If they can't afford t pass on the cost they go out of business. Simple.

You're being naive. See above and maybe go look at some financial statements to see what reality is really like.

Not really. I have personal experience having been both self-employed and an employee. There are clear tax benefits to being self-employeed.

Don't tell me - you're an employee now?

Your comments above make this clear.

Let me ask you as a tax-accountant, if someone came to you and they were in a position where they could choose whether they would be self-employed or an employee, all oher things being equal, from a TAX-PERSPECTIVE only, which would you advise?

Bad questions for the reasons above - what your propose does not change the fact that the business person would still deduct business expenses and the expense you want to allow individuals to deduct.

Even if you could make things "equal" I would recommend self-employment to those who appear capable of it for the simple reason that it is nice to choose your clients/customers, it is nice to have a relatively flexible schedule and it is nice being the boss.

If a person isn't keen on the extra costs of more accounting/legal fees each year, isn't keen on the extra unpaid time for networking and office time, and isn't keen on the business risk and audit risk then he should continue to be an employee and live the simple life.

All true but irrelevant. We are not disputing the overhead and the real PIA it can be to be self-employed or a business, we are discussing the advantage in the tax system given to business and self-employed.

Are you somehow suggesting that the tax advantage is in compensation for it being a PIA to be a business?

So have I. But so what? I have also seen many people who have tried to be employees and fail.

CEOs. CFOs and other executives who are employees suffer the same restrictions as other employees. Generally they have enough clout to negotiate compensation in other tax-advantaged ways (such as stock options and benefits).

I don't think you are personally screwing the system because the system is geared to favour you and other self-employed. It is the system that is screwing employees.

If you look up how much time employees waste on the job you will find studies that show anything from 1-2.5 hours per day.

Even in my business where time is monitored closely and billed out I'm sure that our employees still waste some time.

That is an advantage to being an employee.

When I waste time at work it means that I have to make up for it later or I end up not making as much money.

So, lets look at an employee and a self-employed person separately.

The employee is paid $100,000 and wastes 20% of his employers time and money during the year. That's $20,000 in gross pay that this employee received for not being productive or about $12,000 net of tax.

A sole proprietor makes $200,000 in revenue and deducts $100,000 in business expenses.

Lets say that, objectively, this person is aggressive and claimed, say, $25,000 of expenses that really should not have been claimed because they were clearly personal. The other $75,000 of expenses are, objectively, clearly incurred in order to generate the $200,000 of revenue and are bona fide expenses that would not have been incurred if this business was not operating.

At a marginal tax rate of 40% that is a tax savings, or benefit, of $10,000.

In both cases it is clear that fraud is occurring and both employee and sole proprietor are benefiting at the expense of all honest people.

[msj]

That is the reason I prefer a consumption tax. It is blind to the individual or business. It is applied equally. It reduces bureaucracy and reduces the expense of government which in turn reduces the burden on the tax payer.

As I have pointed out in another thread this is clearly nonsense.

If we replaced all income taxes in Canada with a consumption tax then that tax rate would likely be in the range of 50-60%.

Any alleged savings from the CRA administration would be transferred to customs and patrolling Indian reserves since people would go to the US to buy and then smuggle things into Canada.

[Pat Coghlan]

Certainly people who earn sufficient over and above those expenses will continue to work regardless, mostly because they have no choice. In other situations where work-related expenses consume too much of income and are not tax-deductbale, the potential employee will simply (and logically) choose to collect social benefits where those are available.

None of this speaks favourably for the equity of deductions between businesses and individuals.

Pat, daycare expenses are one of the few deductions offered to individuals which bear some similarity to the many offered businesses. The govenment makes "interpretive" decisions on what are allowed deductions. If a nanny looks after a child but also cooks and cleans, then at least part of her role is personal and part used to generate income.

If you accept the logic that deductions used to generate income should be tax-deductable, then it is irrelevant if it the family with the $250,000 income which is using the deduction or it is a family with $60,000. The simple test is whether the expense is a necessary expense in order to generate income. In the case of a 2 income family, it is deemed necessary. In the case of a single income family, it is not because the other spouse is available to provide childcare. The size of the income is not relevant.

Didn't you just argue a few pages ago that people shouldn't have kids they can't pay for? Yet, here you are arguing that the poor $250K power income couple need a full deduction for their daycare expenses, else their family income might drop by $100K.

Such a family doesn't need tax-subsidized daycare. I would think you would be arguing against this kind of subsidy, yet here you are trumpheting the need for daycare expense deductions, regardless of income.

Following your logic, one of those six-figure spouses should stay home and look after their own kids, shouldn't they?

[Renegade]

Didn't you just argue a few pages ago that people shouldn't have kids they can't pay for? Yet, here you are arguing that the poor $250K power income couple need a full deduction for their daycare expenses, else their family income might drop by $100K.

Such a family doesn't need tax-subsidized daycare. I would think you would be arguing against this kind of subsidy, yet here you are trumpheting the need for daycare expense deductions, regardless of income.

Yes I believe that people shouldn't have kids they can't pay for.

I am not arguing that $250K income couple "need" a full deduction, or my personal view of the deduction, I am simply explaining the tax-code reasoning behind it, as you asked for an explaination. I'm not defending it, if I had my way, I would eliminate that and other deductions completely.

Following your logic, one of those six-figure spouses should stay home and look after their own kids, shouldn't they?

IMV, No, they should do whatever made sense to them, they should simply not expect the taxpayer to subsidize it.

[Jerry J. Fortin]

I am entertained. To read what some folks post gives me a chuckle of two. Here we are in Canada, one of the most taxed places on the planet and we have some people saying that we should simplify the tax code so we could do....what was it we would get by changing the code?

There is no problem with people making lots of money and getting huge tax breaks, but there is a problem with the poor folks who need government services. That is just too funny!

This is a democracy. Soon enough the attitudes of the affluent will give them pause for thought. I wonder how long the citizens of this nation will continue to allow the elitist governments and the perfectly trained corporate lackies to abuse the citizenry with oppressive taxation levels. The time will come when the government will be treating both legal and natural citizens in the same manner. When that time comes there will be much sadness in the world of corporate governance. The leeches who live off of the sweat of others will fall, and they will fall hard.

I will make a prediction here; there is a very deep recession on the horizon. It will cause much loss in the financial markets and destroy much of the heavily leveraged wealth of the high income earners. Many jobs will be lost, but the workers will find other employment, because that is what they do when they work for a living. The business owners will take big hits with many going down for the count. It will be much harder on them, they are not used to actually having to work for a living, but they will be out looking for jobs.

At that point, with much of the earth marred in recession a new government will come into power in this nation with the sole objective of leveling the playing field. The idea will be to make all citizens equal. That government will place much responsibility on its citizens both legal and natural. There will be another round of leech removals, and the beatings will continue until all citizens are treated equally by government. No it certainly won't be communism, it will definitely be a capitalistic society, but both government and business leaders will be held to a far higher standard. The truly rich will stay that way, but the leveraged wannabe will find themselves back where they started with the rest of the population.

Just keep up the high and mighty attitude folks because it speeds the day when real change will come. On that day if you look over your shoulder you will see me waving at you. I will have one thing to say, I told you so.

Edited February 14, 2008 by Jerry J. Fortin